Q4 2012 – Most Recent Fenwick Survey

“The overall results from the fourth quarter of 2012 show that good companies can continue to get very healthy valuations. But with venture investing down in both the fourth quarter and 2012 generally, raising venture capital is not easy. However with Nasdaq up in both 2012 and 2013 to date, there is reason to believe that risk taking and the liquidity markets will improve,” added Patrick.

About the SurveyThe Fenwick & West Quarterly Venture Capital Survey, co-authored by corporate partners Barry J. Kramer and Michael J. Patrick, has been published for over 10 years and offers a unique view of the venture capital market in Silicon Valley by providing insight into the changes in venture capital valuations and terms. Focusing exclusively on trends in venture financing and valuations, the Fenwick & West Survey complements the economic data presented in the Dow Jones VentureSource Survey and the MoneyTree™ Report by PricewaterhouseCoopers and the National Venture Capital Association based on data from Thomson Reuters.

Results By Industry For Current Quarter — The table below sets forth the direction of price changes, Barometer results and number of financings for companies receiving financing in 4Q12:

Fenwick’s Barometer: This concept highlights the magnitude (amount) of share price increase for each private company round (% of price increase). This helps give flavor to the other metric (# of up rounds or % of up rounds) by showing “how much of an up round?”

The Fenwick & West Venture Capital Barometer™ – which measures the change in share price of Silicon Valley companies funded during the quarter compared with the share price of their previous financing round – showed an 85% average price increase for the quarter, a slight increase from the 78% reported in the third quarter of 2012. The median price increase of these financings was 41%, also an increase from the 23% recorded in the third quarter.

Barometer Trend By Industry — The table below sets forth Barometer results by industry group for each of the last eight quarters.

Angels and Accelerators.

There continues to be concern that the angel/accelerator environment has become frothy. CB Insights reported 1749 seed financing rounds in 2012, compared with just 472 in 2009, while Series A rounds grew much more slowly, from 418 in 2009 to 692 in 2012, indicating that there will likely be a lot of seed funded companies that won’t obtain Series A investment. While this is not necessarily bad, as there is value to making small bets on a lot of high risk opportunities, at some point the odds get too high.

Notably, Y Combinator announced in 4Q12 that the amount of money loaned to each of its companies would be reduced from $150,000 to $80,000, and that the size of its class would also be reduced. And Polaris Venture Partners has indicated that it is significantly scaling back its “Dogpatch Labs” incubator. However we do not see a trend yet here, as accelerators like TechStars and 500 Startups are not reducing their size. (Lizette Chapman, VentureWire, December 20, 2012).